By Tom Westbrook and Alun John
SINGAPORE/HONG KONG (Reuters) -Japan's government bond market is being pushed to breaking point in a contest between foreign speculators and the Bank of Japan, creating challenges for loan pricing and bond sales and raising the prospect of government financing tangles down the track.
Extreme stress was evident on Wednesday, when the Bank of Japan (BOJ) spent more than 700 billion yen ($5.2 billion) buying bonds to defend its 10-year yield ceiling, only to see 10-year futures suffer their steepest plunge in almost a decade. [JP/]
Prices have since rebounded, but liquidity is low, the yield curve is kinked at the 10-year tenor - diminishing its relevance as a pricing benchmark - and market makers fret that futures could become an unreliable hedge against other market risks.
"If you lose the function of the futures market, that's a huge problem for (JGB) auctions - you cannot really hedge your auctions ... dealers will all go away," said Naka Matsuzawa, a strategist at Nomura in Tokyo.
The long-somnolent market is suddenly creaking as speculators ramp up bets that the BOJ is going to adjust or abandon a de-facto cap of 0.25% on the 10-year yield.
Policymakers are under pressure since Japan is finally seeing the inflation that the ultra-easy settings were designed to achieve and as the yen tanks against almost every other currency as global central banks have been raising rates quickly.
"The BOJ doesn't really have to do anything, it has cover for not doing so and nothing is going to force its hand," said Ian Samson, a portfolio manager at Fidelity.
"But one pretty reasonable option is to start by widening the band to 0.5% as that helps take some heat out of the yen weakness and doesn't give too much to the speculators."
Samson said Fidelity opened some short bets on the 10-year government bond earlier in the week, figuring it was unlikely to rally much and could be dumped very hard if policy settings shift.
The BOJ concludes a two-day meeting on Friday with no changes expected but with government and other sources saying that further yen declines could prompt a response.
The trigger for Wednesday's rollercoaster ride was the BOJ's surprise buying at the seven-year tenor.
Market participants saw it as an attempt to squeeze out shortsellers from the futures market, since typically bonds with seven years to maturity are delivered to close futures contracts, and driving up their price was intended to force that trade.
But the opposite occurred. Shorts kept selling and spooked dealers dumped their holdings too, sending the 10-year futures price down two full points to 145.58. The contract has since recovered to 147.21.
"Now that the function of the futures is in question they needed to shut their positions right away," Nomura's Matsuzawa said of investors or dealers using futures as a hedge.
Wednesday's turnover was the highest in a year, but the unusual moves have also highlighted the backdrop of a market that has long been declining in functionality as BOJ buying has swollen its holdings to more than 40% of the entire market.
Monthly turnover has steadily dropped from more than $4 trillion in 2013 to less than $3 trillion in March, according to data portal Asian Bonds Online. Yield curve controls also mean the market is losing its relevance as a benchmark for debt pricing and loans.
"If that isn't working, that should be bad for the financial market as a whole," said Deutsche Bank's Japan economist Kentaro Koyama.
"Lower functionality could lead to lower participants ... from a long-term perspective it is challenging for stable public financing."
The trend is unlikely to reverse unless the BOJ does, with downward pressure growing on the yen in the meantime.
"Without verbal intervention, expectations could become even more pessimistic," said Joey Chew, a senior currency strategist at HSBC in Hong Kong in a note to clients.
"Ultimately, actual change to the yield differential is needed for a sustainable correction in dollar/yen, and that could come from changing market views about BOJ, the (Federal Reserve) or recession probability."
(Reporting by Tom Westbrook in Singapore and Alun John in Hong Kong; Editing by Robert Birsel)
MEXICO CITY (Reuters) -Mexican President Andres Manuel Lopez Obrador said on Friday that state oil and gas company Petroleos Mexicanos (Pemex) would spend some $2 billion to lower its methane emissions by up to 98%. Speaking at the Major Economies Forum, a virtual event hosted by U.S. President Joe Biden, Lopez Obrador said the investment would apply to the company's exploration and production unit and would come from Pemex's own funds as well as international credit lines. Lopez Obrador also said Mexico is exploring the creation of solar parks near the U.S. border and transmission lines that could export power to California and other U.S. states.
PRAGUE (AP) — Russia reduced natural gas to Europe again Friday, including cutting flows by half to Italy and Slovakia and completely to France, as countries have worked to ease their dependence on Russian supplies amid the war in Ukraine. It marks the third day of significant reductions to the fuel that powers industry and generates electricity in Europe, which also have hit Germany and Austria. It has further spiked already-high energy prices that are driving record inflation in the European U
NICOSIA, Cyprus (AP) — Breakaway Turkish Cypriots on ethnically-divided Cyprus must do their share in stemming migrant arrivals, a senior European Union official said Saturday, as the number of asylum-seekers has shot up significantly so far this year. European Commission Vice President Margharitis Schinas said that Turkish Cypriot authorities should also be held accountable for curbing migrant arrivals. “We won’t let the Turkish Cypriot community to consider itself neutral in what is going on,”
NEW YORK (AP) — Bitcoin fell below the psychologically important threshold of $20,000 on Saturday for the first time since late 2020, in a fresh sign that the selloff in cryptocurrencies is deepening. The price of the most popular cryptocurrency had plunged as much as 9.7% to less than $18,600 by late afternoon on the East Coast, according to the cryptocurrency news site CoinDesk. At some points during the day, it was below $18,000. The last time bitcoin was at that level was in November 2020, w
CALGARY — There's a famous saying that 'the cure for high prices is high prices,' but when it comes to gasoline, that may not necessarily be the case. Experts are torn on when or even if drivers might see significant "demand destruction" — an economics term for a sustained decline in demand for a product due to excessively high prices — at the pumps. In theory, reaching an unsustainable price would serve as a tipping point and ultimately cause fuel prices to fall, finally offering drivers some r
Western nations imposed economic sanctions on Russia, the most severe a nation in a modern history has faced, after Moscow sent troops to Ukraine on Feb. 24 calling it "special military operation". Russian assets took an immediate hit and consumer prices have soared, prompting authorities to introduce capital controls, hike the key rate and curb foreign investors' ability to sell their assets in Russia. German Gref, whose bank is seen as a proxy for the Russian economy by holding the majority of the household deposits and corporate loans, estimated on Friday that countries that hit Russia with sanctions accounted for 56% of its exports and 51% of imports.
ISLAMABAD (AP) — An international watchdog said Friday it will keep Pakistan on a so-called “gray list” of countries that do not take full measures to combat money laundering and terror financing but raised hopes that its removal would follow an upcoming visit to Islamabad to determine its progress. The announcement by Marcus Pleyer, the president of the Financial Action Task Force, was a blow to Pakistan’s newly elected government, which believes that it has mostly complied with the tasks set b
KORE Mining Ltd. (TSXV: KORE) (OTCQX: KOREF) ("KORE" or the "Company") announces a plan to conserve capital and focus on high impact drilling activities at both of KORE's main assets, the Imperial gold project ("Imperial") and the Long Valley gold project ("Long Valley"). James Hynes, the current Executive Chairman and founder of KORE, will assume the President and CEO role effective July 1, 2022. Additional cost reductions at the corporate and project levels are designed to preserve cash and fo
LONDON (AP) — Thousands of people marched through central London on Saturday in a protest over the soaring cost of living in Britain. Huge crowds flooded into the British capital for the rally to demand that the government do more to help people faced with bills and other expenses that are rising more quickly than their wages. Prime Minister Boris Johnson has been criticized for being slow to respond to the cost-of-living crisis. Inflation in Britain and across Europe has been surging, as Russia
LONDON (AP) — Russian hostilities in Ukraine are preventing grain from leaving the “breadbasket of the world" and making food more expensive across the globe, threatening to worsen shortages, hunger and political instability in developing countries. Together, Russia and Ukraine export nearly a third of the world’s wheat and barley, more than 70% of its sunflower oil and are big suppliers of corn. Russia is the top global fertilizer producer. World food prices were already climbing, and the war m
(Reuters) -Federal Reserve Governor Christopher Waller on Saturday became the latest U.S. central banker to pledge a whatever-it-takes approach to fighting inflation, three days after the Fed raised interest rates by three-quarters of a percentage point and signaled more hikes to come. "If the data comes in as I expect, I will support a similar-sized move at our July meeting," Waller told a Society for Computational Economics conference in Dallas. "The Fed is 'all in' on re-establishing price stability."
These top TSX financial stocks now look oversold for a self-directed TFSA or RRSP portfolio. The post 2 Top TSX Financial Stocks to Buy for a Retirement Fund During the Market Correction appeared first on The Motley Fool Canada.
NEW YORK (Reuters) -Revlon Inc received bankruptcy court approval to borrow $375 million on Friday, saying it would use the funds to shore up supply chain problems that would otherwise imperil the cosmetic maker's sales during the busy Christmas season. U.S. Bankruptcy Judge David Jones in New York approved Revlon's proposed bankruptcy loan on an interim basis after hearing testimony that Revlon was down to $6 million in cash and struggling to fulfill retail customer orders. Revlon chief restructuring officer Robert Caruso testified Friday that most of Revlon's raw material vendors have stopped sending shipments, and many were demanding payment of past debts or deposits on future deliveries.
The Tax-Free Savings Account is a great vehicle to compound streams of passive income. Here's an easy way to earn $350 a month! The post TFSA Passive Income: How to Easily Make $350/Month TAX FREE! appeared first on The Motley Fool Canada.
OMAHA, Neb. (AP) — An anonymous bidder has shelled out a record $19 million for a private lunch with billionaire Warren Buffet at a steakhouse in New York City. The meal with the Berkshire Hathaway CEO was offered on an eBay auction to benefit the San-Francisco-based charity GLIDE, which helps homeless people and those in poverty. The winner can bring up to seven guests. Buffett has raised $53 million for GLIDE since the auction began in 2000. The charity earned the philanthropist billionaire's
SQI Diagnostics Inc. ("SQI" or the "Company") (TSXV: SQD) (OTCQB: SQIDF), a life sciences and diagnostics company that develops and commercializes proprietary technologies and products for advanced microarray diagnostics, today announces that it has completed a non-brokered private placement (the "Offering") of secured debentures at a price of $1,000 per Debenture for aggregate gross proceeds of $4.05 million (collectively, the "Debentures").
The pickup, currently priced at about $80,000 to $110,000, has more than 77,500 existing bookings which will not be impacted by the price hike as it will come into effect for vehicles reserved on or after Saturday, GM said. The company has been able to offset $5 billion in higher supply chain costs by raising prices and cutting expenses, GM Chief Financial Officer Paul Jacobson told investors at a conference sponsored by Deutsche Bank on Wednesday. EV maker Rivian Automotive Inc has also raised prices on its pickup trucks by 20%, however, the company rolled back the hikes on vehicles booked before March 1 after facing backlash from customers.
EDMONTON — The 97 Hot Pot restaurant in Edmonton's Chinatown used to be crowded on weekends, with some customers lining up and craving slow-cooked veggies, lamb and beef. But that hasn't been the case lately. Manager Vincent Lau says the killings of two workers from nearby shops last monthand years of social disorder in the century-old downtown neighbourhood have scared away many regulars. "Business has died down significantly in the last few weeks," said Lau, who lives a 15-minute walk from the
LONDON (Reuters) -Russian gas flows to Europe fell short of demand on Friday, coinciding with an early heatwave gripping its south and boosting benchmark prices already lifted by concerns the continent may struggle to build up storage in time for winter. Italy and Slovakia reported receiving less than half of the usual volumes through the Nordstream 1 pipeline, which crosses the Baltic Sea from Russia to Germany and accounts for around 40% of Russian pipeline flows to the European Union. France said it had received no Russian gas from Germany since June 15.
Modern Plant Based Foods Inc., (CSE: MEAT) ("Modern Plant Based Foods") or (the "Company"), an award-winning plant-based food company is pleased to report that kitskitchen Health Foods Inc., (kitskitchen) a portfolio company of Modern Plant-Based Foods has rolled out its preservative-free plant-based soups into Loblaws Supermarket Chain, Canada's Largest food retailer. Loblaw Companies Limited was established in 1919, now with revenues north of $51 billion, provides Canadians with grocery, pharm